Strategy Map

Strategy Maps

A good strategy map should communicate everything a company is striving to achieve on a single page. If your company is made up of only five people or is an enterprise of 5,000 people first and foremost you want them to know exactly what the company is about and what it is trying to achieve. What is more, your employees want to know that your company has ambition and plans and will be around for the long haul. They want to be sure that the leaders know what they are doing and are in control. They want to work in a winning environment and want to know their jobs are secure. One of the most powerful tools in your armoury is a strategy map (that and consistently winning profitable business, the two are inextricably linked).

There are many views as to what a good strategy map should look like and what form it should take. Tesco for instance, has developed a strategy map in the form of a circle which is centred on their ‘Every little helps’ slogan and the two company principles ‘no-one tries harder for customers’ and ‘treat people how we like to be treated’. Tesco, of course, has the resources to not only spend time on developing their strategy but also developing an innovative presentation method. The latter is something that many companies cannot afford to do. There are however, several industry standard templates that can be used, not least of which is the Kaplan/Norton Balanced Scorecard approach. For more information on the Balanced Scorecard, check out the Intrafocus Guide to the Balanced Scorecard.

To make the most of a Strategy Map we would suggest one or two additions to the basic template. The basic balanced scorecard template focuses on four areas of business referred to as ‘perspectives’ these are: 1. The Financial Perspective, 2. The Customer Perspective, 3. The Internal Processes Perspective, 4. The Organisational Growth Perspective. In addition to these four perspectives there are three things that need to be highlighted, these are: 1. A Vision Statement, 2. A Mission Statement and 3. A Core Values Statement. It is true that these statements could be included within the four perspectives, but given their importance in their own right, they should be given the right level of prominence in a strategy map. So how does this all come together? The easiest way to demonstrate is through a sample strategy map template (click on map to enlarge):

There is an argument that there is a fourth element of the strategy that should be highlighted, that of the Customer Value Proposition, on balance this statement should fit easily within the customer perspective and is part of the Mission statement so the need to specifically highlight it is not imperative. Using the above template, any organisation, large or small should be able to describe what they are in business for and what they intend to achieve. For more information on strategy maps and for a selection of strategy map templates, see the documents to the right.

Strategy Map for a CEO

Clive Keyte 

How many pieces of information can you deal with at any given time? It doesn’t matter if you are Bernstein or Einstein there is a limit to the number of things you can do simultaneously. We all like to think that we can multi-task and get more done. The reality is, without exception, we all work on one thing at a time. The more have on our plate, the shorter amounts of time we dedicate to any single item. This is something that every CEO needs to know. Firstly to be aware of the strain this puts on an organisation and secondly to better understand how to manage key information when it is presented.

There are three simple questions a CEO needs to ask:

• What do I need to know?
• Who needs to tell me?
• How often do I need it?

Typically, a CEO will manage an organisation through a set of review meetings. The review meetings will usually take place every month. The people attending the reviews always want to tell their story. They want to be seen and heard and will inevitably go into great detail if allowed. A good CEO will manage this situation and get the balance right between receiving relevant information and allowing the presenter enough time to impress. However, these meetings take a long time and they often do not focus on the right things. What the CEO really needs is a mechanism that provides the facts in a easily digestible format that throws a focus on the things that really matter.

This is where a CEO Strategy Map really comes into its own. If created correctly, a CEO Strategy Map will consist of around twelve items separated into four major areas.This means for any given area of the business, the CEO only needs to look at a maximum of three things. A number small enough to allow full focus on every item. Better still, if the Strategy Map is part of a management system (it should be) the items listed will be coloured with a red/amber/green status. Therefore focus can be given to the areas that need it and the rest left alone.

The following diagram is an example of a Strategy Map for a telecommunications company:

Image from Intrafocus limited – example of a balanced scorecard strategy map

The key to ensuring this works is the data that resides under the Strategy Map. For every objective on the map there will be a set of measures. These measures have to be created with great care and attention. At the CEO level, each measure truly is a Key Performance Indicator (KPI) and more often than not will be derived from several other measures and presented in the form of an index. For example, the Customer Satisfaction Index is derived from a variety of both external measures (what the customer thinks) and internal measures (how well we are performing).

In this way, the CEO gets to see an amalgam of critical measures presented in a way that reflects the performance of the business as related to a set of business objectives. In larger companies or organisations there would be a top level corporate Strategy Map and several departmental Strategy Maps aligned to the corporate view.

You might have noticed the ‘trend’ arrows in the diagram above. These are vitally important. It is essential that decisions are NOT made on snap-shot information. For any anomaly the supporting tend data needs to be looked at. That is, the last few months history of the supporting measures/initiatives. In the case above it would seem obvious to look at the red item “Improve Offering Selection”. This needs to be done, but we can also see from the trend arrows that the measurements supporting the green objective “Improve Knowledge and Skills” are declining. This will almost certainly be a contributing factor to the red and amber items above it.

http://customerthink.com/

What is the Balanced Scorecard?

What is the Balanced Scorecard? – The design of Balanced Scorecard concerns itself with the identification of a small number of financial and non-financial objectives related to strategy. It then looks at measures, setting targets for the measures and finally recording and monitoring them on a regular basis to determine success or failure. Only when this is in place can strategic initiatives/projects can be considered. It is in this area that the Balanced Scorecard approach differs from other strategic methodologies. It forces an organisation to think about how objectives can be measured first and then what initiatives can be put in place to satisfy the objectives. The basis behind this is to avoid creating initiatives/projects too early and measuring success based only on initiative/project completion.

There are two aspects of this activity that need to be brought out: 1. The scorecard identifies a number of financial and non-financial objectives. These objectives are few in number and are critical to the sustainability or growth the organisation. These objectives are related to four major categories to ‘balance’ the scorecard. 2. Measurement is a crucial part of the activity. Each objective must be measurable. These measures are often referred to as Key Performance Indicators (KPIs). They should include both leading and trailing measures. For more on this subject, download the guide. The ‘balance’ that a Balanced Scorecard achieves is brought about by a focus on financial and non-financial measure that can be attributed to four areas of an organisation that are described as Perspectives. These are: Financial, Customer, Internal Business Processes and Organisational Capacity.

The Balanced Scorecard is framework used to implement and manage strategy at all levels of an enterprise, business or organisation. It links objectives, measures, and initiatives to a strategy. The scorecard provides a view of an organisation’s overall performance. It integrates financial measures with other key performance indicators related to customers, internal business processes, and capacity, learning, and growth.   Watch the video and download a copy of the final drawing. 

Balanced Scorecard

The Balanced Scorecard is a performance management tool developed by HBS professors Norton and Kaplan in the early 1990s (originally in an HBR article of 1992). BSC stipulates that a company’s vision and strategy can be translated into various metrics that cascade down through the organization. The key finding is that these metrics should not only be financial, but should also include three other key elements: Customer related metrics, internal process metrics, and learning and growth metrics.

The balanced scorecard forces managers to look at the business from four important perspectives. It links performance measures by requiring firms to address four basic questions:

(a) How do customers see us? - Customer perspective

(b) What must we excel at? - Internal perspective

(c) Can we continue to improve and create value? - Innovation & learning perspective

(d) How do we look to shareholders? - Financial perspective

Many companies (but also government agencies and non-profits) have instituted Balanced Scorecards in a rigorous way, often involving long-term projects and software tools. The objective in these implementation is to identify causal relationships: If our vision and strategy includes the fact that we want to become the most customer friendly company in our industry, then we want to pick four or five key customer metrics that best reflect this objective, e.g.: Being ranked #1 in independent customer satisfaction surveys, having a product return rate of less than x%, respond to all customer contacts within a time of y, etc. This list is not complete, as a matter of fact it is critical that an organization pick only the key metrics that really matter.

The exercise then continues, and the highest level metrics are being translated into key metrics for different departments, key initiatives that have to be undertaken, etc. Some companies even have linked employee objectives to the overall BSC.

References

1 Kaplan RS and Norton DP, "The Balanced Scorecard - Measures that drive performance", Harvard Business Review, 1992 Jan/Feb, pp71-79.

2 Kaplan RS and Norton DP. "Putting the Balanced Scorecard to Work, Harvard Business Review, September-October 1993. pp134-147 (Presents a series of cases about the balanced scorecard. Also documents Kaplan and Norton's process for developing a balanced scorecard.)

3 Kaplan RS and Norton DP. "Using the Balanced Scorecard as a Strategic Management System". Harvard Business Review, January-February 1996 pp75-85 (Presents Kaplan and Norton's thoughts on how the balanced scorecard can be used as a strategic management system.)

For more information see www.balancedscorecard.org.

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